US embassy cable - 05SANAA3206

UNCLAS SANAA 003206 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: PREL, EAID, YM, ECON/COM 
SUBJECT: MOPIC PLAYS SHELL GAME WITH USDA $60 MILLION 
 
1. (SBU) Summary: Ambassador met with Deputy Prime Minister 
Ahmed Sofan on October 17, to convey USG's serious and 
growing concerns about the U.S. Department of Agriculture 
(USDA) food aid programs in Yemen.  Ambassador told Sofan 
that USDA is sending a compliance team shortly to investigate 
and review the ROYG's handling of the programs from 1999 to 
present.  The review must precede authorization of a 2005 
shipment and any future programs.  Sofan shied away from 
responsibility on previously signed commitments, saying, "It 
is in your hands, not ours."  End summary. 
 
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BACKGROUND 
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2. (SBU) In recent months, post has investigated the ROYG's 
management of various PL-480 and 416b programs since 1999. 
These programs amount to more than $80 million.  According to 
a September 28 conversation with USDA Export Credits Deputy 
Director Ron Croushorn, USDA estimated that approximately $60 
million remains unspent in Central Bank accounts.  Post, 
however, estimated that there were approximately $50 million 
in unspent funds, based on limited documents, an estimate of 
commodity sales, and the promised return of misallocated 
funds by the ROYG.  During the investigation since May 2005, 
Post discovered several questionable expenditures and 
processes in the program, which were reported to USDA FAS 
Cairo and USDA Washington. 
 
3. (SBU) On September 12, in an effort to resolve these 
problems, DCM and MOPIC Director General Nabil Shaiban signed 
minutes that outlined the following ROYG commitments: 
 
a) Transfer of $8.9 million in misappropriated funds to an 
interest-bearing commercial account by October 30; 
b) Transfer of all FY 2003 and FY 2004 funds (amounting to an 
estimated $39.5 million) to an commercial account by end of 
October; 
c) Signing of seven FY 2003 MOUs which have not been 
completed since October 2004; 
d) Cooperate with an official USDA review; 
e) Justification for the purchase of 75,000 school desks; and, 
f) Transfer of $1.6 million to the Social Fund for 
Development (SFD) for the Marib Museum (allocated in 
2002/2003) 
 
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"THE COMPLIANCE TEAM IS COMING" 
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4. (SBU) USDA will be sending a compliance team to Yemen to 
review ROYG's management of the food aid program since 1999. 
The Ambassador met with Sofan to communicate, in strong 
terms, the seriousness of this action.  He pointed out that 
"this assessment must precede authorization of the 2005 
shipment and any future programs."  He urged Sofan to 
complete all the commitments signed by the DCM and Shaiban 
before the compliance team comes in order to demonstrate that 
the ROYG has cleaned up the management of the program.  Sofan 
asserted that an honest effort was underway to meet all 
commitments but his government would not be returning the 
$8.9 million in misallocated funds until January when a new 
budget line for the item can be put in the national budget. 
 
5. (SBU) Ambassador explained that the issue is not just the 
$8.9 million, but that the ROYG needs to transfer as much as 
$60 million from the Central Bank into an interest-bearing 
commercial account by October 30 and sign the seven 2003 
MOUs.  Ambassador continued, "You've got less than two weeks 
to do this according to the agreement."   Sofan indicated 
that he knew of the commitments of the agreement, but 
insisted that it was the Embassy that was stalling on the 
program, that he would not do anything without the agreement 
of the joint Embassy-MOPIC technical committee, and closed by 
saying: "It is in your hands, not ours."  The Ambassador 
firmly disagreed, "No, it's in your hands," and ended the 
meeting then moved on to other bilateral issues. 
 
6. (SBU) As a direct result of this meeting, post received 
the seven requested 2003 MOUs on October 22.  We have yet to 
see, however, a new interest-bearing account created in which 
to place all food-aid money. 
Krajeski